Geithner's toxic asset plan expected to be unveiled next week
WASHINGTON -- Treasury Secretary Timothy Geithner is putting the finishing touches on a plan to get toxic assets off the books of the country's struggling banks, according to administration and industry officials. The plan could be announced as soon as Monday, they said.
Geithner's proposal will employ the resources of the Federal Reserve and the Federal Deposit Insurance Corp. to make the government's $700 billion financial rescue fund go further, these officials said Friday.
The Fed and the FDIC are being tapped for support because the prospects for getting additional money from Congress for the bailout effort have dimmed significantly with this week's uproar over millions of dollars in bonuses provided to troubled insurance giant American International Group Inc.
The officials, who spoke on condition of anonymity because they were not authorized to speak publicly about Geithner's plan, said it will have three major parts. One part will be an effort Geithner spoke about last month which would be the creation of a public-private partnership to back purchases of bad assets by private investors.
A second part of the plan will expand a recently launched program being run by the Federal Reserve called the Term Asset-Backed Securities Loan Facility, or TALF. That program is providing loans for investors to buy assets backed by consumer debt in an effort to make it easier for consumers to get auto, student and credit card loans. Under Geithner's proposal, this program would be expanded to support investors' purchases of banks' toxic assets.
The third part of the Geithner plan would utilize the resources of the FDIC, the agency that guarantees bank deposits, to purchase toxic assets.
When Geithner announced the administration's overhaul of the troubled financial rescue program on Feb. 10, it was widely panned by investors with the Dow Jones industrial average plunging by 380 points.
Geithner's new plan on toxic assets would attack what many analysts see as the major failing of the bank rescue effort so far, the failure to rid banks' of more than $1 trillion in bad loans and other troubled assets weighing down banks' books. As a result, banks have been unable to shake off the effects of the worst financial crisis to hit the country in seven decades.
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